If you already have an idea for your business and you are determined to start, It's high time you take the first step to make your dream a reality - create a business plan and look for an adequate source of financing.
Estimate well, how much money do you need to start.
The most important thing is to estimate how much money you will need to kick off your project. Contrary to popular belief you don't need much to start. However, you have to plan well your budget, where and when your money is going to go, and how long it will take you to earn it back. Don't forget about a reserve for unplanned expenses (25-50% of your budget).
Creating a business plan will help you to earn your future investors trust. Nobody will put his money into your business if he doesn't believe you are going to spend it well.
Which source of financing should you choose?
According to statistics, top funding sources are: personal savings (57% of startups funded), „Love money” from friends and family (38% of startups funded) and credits. Other sources like Angel Investors, Venture Capital are offering very high ranges of investments (typical are between $25,000 and $1.5 million) however, you should take into account that their expected rates of return can be as high as 50 percent annually and will limit your control over company. That's why most businesses are rather financed by personal savings as they start (for instance: Github, 37signals).
The most important thing to remember is that the source of financing you choose must match the needs of your company. So whether you should choose crowd funding or look for the Angel investor always try to analyse all it's pros and cons. To do that, you might find our infographic helpful: Which source of financing should you choose?
What did we learn from working with our clients?
Starting a new business doesn't have to cost you a fortune. While looking for an outside investment you can start small on your own and think how to make the best of your resources. The good news is: with little money you have you can do a lot! Here is what we have learned from working with our clients:
Test your idea.
Very often you can take some actions to evaluate your business idea and test your market before formally starting a company. This is how a "Skilltrade" project has developed. At first a facebook funpage was created where people could "trade" i.e. exchange their skills with others. When it became popular we helped to build a mobile app with more features and that's how Skilltrade became an independent platform.
Divide big tasks into smaller ones.
Building web applications taught us that it's tremendously important to divide tasks into smaller modules. We always plan with our clients a set of „sprints” - two week sessions in which we realize specified tasks. What are the advantages of this system? You build your app step by step, divide your work and money in time according to your resources and you can easily monitor the work progress.
Build a prototype.
If you were an investor, would you rather invest in „just an idea” or a project which is already prototyped? It is much easier to attract outside investment once you have a prototype to show. Moreover, it will expose your app to a broader audience and will help you validate your business model. A good example of the prototype we have recently built is the one for Buyforbussines – marketplace for sellers and buyers of professional goods and services. It took only 12 weeks to create it and now it's already available here: Buyforbusiness. Later on, basing on reports and user feedback we may plan to further improve the product.
Last things to remember
One rule to remember is: always be raising, even if you are just starting, you should be constantly active in the investor community. Meetings with investors are extremely important: even if someone wouldn't invest in your project he can give you a valuable feedback. Remember to choose the right source of financing for your business profile and don’t give up if it would take a while to get funding. Patience and persistence always pay back.